Court Modifies Stay Order, Allows Appellant to Pay Rs. 40 Lakhs in Two Installments, Elgi Rubber Co. Ltd. Acts as Payer.

The HC modified the initial stay order, allowing the appellant to pay Rs. 40 lakhs in two installments instead of the original 20% demand. The first installment was due by a specified date, and the second a month later. Elgi Rubber Co. Ltd. was designated to make the payment on behalf of the appellant. The writ appeal was disposed of without costs, and any default in payment would permit further legal action by the respondent authorities. Connected miscellaneous petitions were closed.

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Issues:
Challenge to order under Income Tax Act - Assessment under section 147 - Rectification petition - Stay petition - Writ petition for setting aside stay order - Appeal against rejection of stay order - Modification of stay condition.

Analysis:
The appellant challenged an order under the Income Tax Act, claiming they were dissolved without winding up and not in existence during the relevant financial year. Despite this, the Assessing Officer made an addition under section 69A of the Act. The appellant filed a rectification petition, which was partially allowed, leading to an appeal before the third respondent. A stay petition was filed but rejected for not paying 20% of the demand. The appellant then filed a writ petition to set aside the rejection of the stay order. The High Court, in the writ appeal, modified the stay condition, requiring the appellant to pay Rs. 40 lakhs in two installments for grant of stay until the appeal is disposed of.

The appellant argued that the pre-condition of depositing 20% of the demand for grant of stay was excessive and requested it to be reduced to Rs. 40 lakhs, around 10% of the demand, payable in two equal installments. The Standing Counsel for the respondents had no serious objection to this request. The High Court, considering the challenge was only regarding the rejection of the stay order, set aside the order of the first respondent and modified it by granting a stay subject to the appellant paying Rs. 40 lakhs in two installments, with the first installment due by a specified date and the final installment due a month later.

The High Court's order stated that Elgi Rubber Company Limited would make the conditional payment on behalf of the appellant, and in case of the appellant's success, the refund would be made to Elgi Rubber Company Limited. It was emphasized that any default in payment by the appellant would result in further action by the respondent authorities as per the law. The writ appeal was disposed of with no costs, and connected miscellaneous petitions were closed.

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